Incident: On October 29, 2024, the company released its three-quarter report. In Q1-Q3, the company's revenue/net profit after deduction reached 28.959/4.99/4.686 billion yuan, -6.52%/+1.67%/+1.96% year-on-year, after deducting non-return net interest rate of +1.34pct year-on-year. According to estimates, 24Q3's revenue/net profit attributable to mother and net profit after deduction reached 8.891/1.348/1.26 billion yuan, -5.28%/-9.03%/-7.94% year-on-year, with net interest rate of -0.41 pct year-on-year after deduction.

The recovery from fresh drinking is slow, and income is under pressure in the short term. 24Q3's revenue was -5.28%. On the one hand, demand for fresh drinks was still weak in the third quarter. At the same time, the company strictly controlled its inventory and kept a close eye on market health. Q3 sales volume was 2.155 million kiloliters, or -5.11% compared to the same period last year. By product structure, Q3 main brands sold 1.225 million tons, -4.1% year on year, accounting for +0.57 pct year on year. Among them, high-end products sold 0.883 million tons, -4.7% year on year, accounting for +0.2 pct year on year; other brands sold 0.93 million tons, or -6.3% year on year. The slow recovery of the catering and nightclub channels objectively affected the company's product structure upgrade rate. The Q3 tonnage price was 4,126 yuan, -0.18% over the same period last year.

Increased investment expenses during the peak season, and the decline in gross sales margin dragged down profit growth, and losses are expected to decrease in Q4. Q3 The company's tonnage cost was -2.20%, and the decline narrowed from month to month. Apart from the weakening of the scale effect under pressure on sales, it is expected that the cost of new products such as Augut and White Beer will be high, mainly due to the company H1. Due to cost contributions, the company's Q3 gross margin was +1.19pct year over year to 42.12%. On the cost side, the Q3 sales expense ratio was +2.41pct. This is due to weak demand for fresh drinks this year. During the Q2-3 peak sales season, companies increased brand and market promotion expenses, which may have an impact on the settlement rhythm during the quarter. Expense control was good for the rest of the period, with the management rate -0.87pct year on year. Q3 The company's gross sales margin was -1.21pct year on year, dragging down non-return net interest rate of -0.41pct year on year to 14.17%. Looking ahead to the fourth quarter, 23Q4 was affected by public opinion events, and the company's sales volume declined significantly (-10% compared to the same period). At the same time, in order to stabilize channel investment expenses (sales rate +10pct year over year), sales are expected to stabilize in Q4 this year, based on a low base and low inventory, while reducing losses by a certain margin.

Short-term recommendations focus on the recovery of drinking channels; there is still plenty of room for medium- to long-term growth. The 2024 channel structure is an important factor affecting the revenue performance differentiation of leading beer companies. Tsing Beer's share and tonnage price are more affected by the weak beta in the catering channel, so if the external environment warms up later, Tsing Beer's resilience is also quite impressive.

The company's channel inventory status continued to be optimized in July-September of this year. It is expected that the pace will continue until the end of the year, laying the foundation for young players to enter the market and recover their share. At present, the competitive trend in China's beer industry is still at a good stage. There is plenty of room for high-end development, and the improvement of the industry structure is driven by both supply and demand. In the medium to long term, the company's big single product classics continue to take on the upward upgrading of lower products in the core base market, and there is also room for iterative optimization within the middle and low end products. It is recommended to continue to monitor the recovery of the drinking channel economy.

Investment advice: As downstream ready-to-drink channels continue to recover slowly, we have moderately lowered the company's profit forecast.

The company's 2024-2026 revenue is expected to be 31.947/33.576/35.087 billion yuan, respectively; net profit to mother is 4.412/4.907/5.315 billion yuan, respectively, up 3.4%/11.2%/8.3% year-on-year, respectively. The PE corresponding to the current stock price is 21/19/17 times, respectively, maintaining the “recommended” rating.

Risk warning: Peak season weather falls short of expectations; food and beverage recovery falls short of expectations; competition for middle and high-end beer intensifies, etc.